JP Morgan remained in the black in the fourth quarter of 2008, but its profits dropped sharply to $702 million after significant losses on leveraged loan and mortgage exposure.

The bank's profits fell 74% from the corresponding period last year, though the result is still favourable compared with many of its peers. In the fourth quarter of 2007, the bank saw a profit of $3.0 billion. During the full calendar year in 2008, it posted a net income of $5.6 billion.

JP Morgan attributed the decline primarily to losses on leveraged loans and mortgage trading positions. Hardest hit was the group's investment banking division, which experienced a $2.4 billion net loss, mostly due to its leveraged loan exposures. 2008 saw the bank take over both Bear Stearns and Washington Mutual, and receive a $15 billion capital injection in October from the US Treasury.

Although the bank has managed to sidestep the worst of the financial crisis, chief executive Jamie Dimon warned of future troubles: "If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves."

Rating agency Moody's agreed: downgrading the bank's credit rating one notch to Aa3, it warned of "the poor prospect of JPM generating capital in the current recession," adding that the bank could face several quarters of losses this year, due to the slowing economy and further markdowns on its mortgage and credit card portfolio.

The bank continued to expand its lending in the fourth quarter, with new credit card, mortgage and other lending totalling $100 billion, it said.

A quant at Citi has revived debate about the changing nature of the profession (www.risk.net/2417747). The scope is narrower, he claims; the job has been dumbed down, and today's quants are little more than programmers. Is he right?